Solved

Oregon resident with a K-1 (1120S) from California. Is the tax credit request in Oregon or California?

Forum|Forum|6 years ago
February 27, 2020
1 reply
0 views

I've received a taxable K-1 from an SCorp.
I've filed the amount in both Oregon (my home state), and on a non-resident California return.

The laws between Oregon and California are not clear to me.

The credit to prevent double-taxation is normally given on the home state return, but I've read some advice that says when it's between California and Oregon, the tax credit should be on the California return.

Which is it?

Best answer by DanielV01

The credit will be on the California return. Usually, when you have income from a nonresident state, it is taxed both by the state where it is earned as well as by the state where you live. To prevent (or lessen) the effect of double-taxation, the resident state will give a credit for the tax you must pay to the nonresident state for the income produced in that state.

However, Oregon and California are reverse credit states. This means that the credit works in reverse: the nonresident state will give you a credit for the taxes you pay to your resident state. Thus, since you are an Oregon resident, you will prepare the Oregon state return first, and then, when finished, prepare the California return. The tax credit from Oregon will reduce the California tax, possibly down to $0.

The fact that the income is generated from an S-Corp does not matter in this case. Rather, it is the fact that you live in Oregon, and the income comes from California.

DanielV01Answer

Employee

The credit will be on the California return. Usually, when you have income from a nonresident state, it is taxed both by the state where it is earned as well as by the state where you live. To prevent (or lessen) the effect of double-taxation, the resident state will give a credit for the tax you must pay to the nonresident state for the income produced in that state.

However, Oregon and California are reverse credit states. This means that the credit works in reverse: the nonresident state will give you a credit for the taxes you pay to your resident state. Thus, since you are an Oregon resident, you will prepare the Oregon state return first, and then, when finished, prepare the California return. The tax credit from Oregon will reduce the California tax, possibly down to $0.

The fact that the income is generated from an S-Corp does not matter in this case. Rather, it is the fact that you live in Oregon, and the income comes from California.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

T

toshi-minoura

We live in Oregon and have income from California. I vaguely remember that the instruction for Turbotax once stated that we should calculate the tax for California first and use that mount as a credit for the tax in Oregon. Does the current Turbotax work as you describe?

If you now the California and Oregon tax forms related to this topic, let me know.